Soaring VOD demand significant investment opportunity for European telcos

Thursday, July 14th, 2016
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Soaring Appetite for On-Demand Video Services Presents Significant Investment Opportunity for European Telecoms Operators, says Pyramid Research

The availability of fast fixed and mobile next generation networks has significantly changed video consumption habits in Europe, driving mobile video, on-demand video and multi-screen viewing, according to insight from Pyramid Research

The company’s report* states that an increasing consumer appetite for on-demand video services presents an opportunity for operators to complement their core portfolio of services and add new revenue streams. Satellite operator Sky UK, for example, has achieved this by launching its internet-based over-the-top (OTT) service, Now TV.

Stephanie Char, Western Europe Analyst at Pyramid Research, explains, “European markets offer a favorable environment for OTT adoption due to high fixed and mobile broadband penetration rates, high proliferation of connected devices, greater volume of online video catalogs and increasing pay-TV penetration, which will reach 73% of households in Central and Eastern Europe (CEE) and 69% in Western Europe (WE) by 2020.”

According to Pyramid Research’s Digital Consumer Analyzer, the adoption of subscription-based OTT video and video on demand (VoD) services has grown steadily in the UK over the past two years, reaching 37% and 23% of pay-TV users respectively in the second quarter of 2016.

Netflix and Amazon Prime play an important role in driving the adoption of OTT video services. UK consumers show a clear preference for Amazon Prime and Netflix video services as providers of the most desired content bundled with mobile services, with scores of 27% and 18% for smartphone users, and 29% and 20% for tablet users respectively.

Char continues: “The OTT video market in Europe is likely to witness robust growth, owing to strong interest from customers in content and OTT players’ investments in content and platforms. LTE service adoption will play an important role in driving OTT video adoption across Europe. Pyramid Research expects 4G connections to reach 66% of total SIM cards in WE and 29% in CEE by 2020.

“OTT players should focus on domestic content and local languages to boost the uptake of their services and revenue. Content is vital to any successful paid video service. However, linguistic diversity in the European markets has posed a challenge to OTT service providers. The lack of availability of foreign content in local languages limits market penetration for international OTT players.

“Netflix, however, has started to combat this by producing original content in local languages, such as the TV series Marseille in France, and will launch similar content in Germany and Spain starting in late 2016. For EU member countries, the EU encourages OTT providers to include at least 20% European content in their catalogs.”

* OTT Video in Europe: Focus on Domestic Content and Local Languages to Boost Take Up of Services